What Is the Definition of Professional Liability Insurance?
The professional liability insurance definition is a type of business insurance that helps cover claims that a small business made a mistake in the professional services given. You may have heard of other names for professional liability insurance
, such as:
- Errors and omissions insurance
- E&O insurance
Despite a business owner’s best efforts to run a perfect small business, mistakes can happen. Your clients or customers can sue you for a mistake in the services your business provides. Even if it didn’t cause them financial losses, you can still get sued.
How Does Professional Liability Insurance Work?
Many insurers write professional liability insurance on a claims-made basis. This includes a retroactive date and extended reporting period. These are two important factors in how professional liability insurance works.
A retroactive date covers incidents that happen on or after a specified date in your policy. The extended reporting period helps cover claims filed within a certain time after your policy expires.
Some professional liability policies can be written on an occurrence policy. This means you’ll have coverage for losses that happen during your policy period, even if the claim gets reported after it expired.
Who Needs Professional Liability Insurance?
Be aware that some states require certain businesses to carry professional liability coverage. For example, professional liability insurance is also known as medical malpractice insurance, and some states may require a business in the health care industry to carry this.
Types of Professional Liability Coverage
Professional liability insurance can help cover claims of error or omission in the professional services given. It can also help protect your business from claims of:
- Personal injury
- Inaccurate advice
If your business gets sued for one of these reasons, professional liability insurance can help pay for your:
- Legal defense costs
- Disciplinary proceedings
- Loss of earnings
- Subpoena assistance
It’s important to remember that professional liability insurance coverage doesn’t cover every claim.
For example, if your business causes a bodily injury or property damage to someone else’s belongings, it won’t help you. Instead, you’d need to get a general liability insurance
policy to help cover these claims.
General Liability vs. Professional Liability Insurance
General liability and professional liability insurance are two different types of coverage. But they’re both essential for business owners.
General liability insurance helps cover claims that your business caused bodily injury or property damage to others. Professional liability insurance helps cover claims that your business made a mistake in the professional services given.
How Much Does It Cost?
Professional liability insurance costs vary because every small business is unique. Generally, it could cost several hundred to a few thousand dollars. Insurers use different factors to determine costs, such as:
- Type of business
- Claims history
- Years in business
- Policy details, like coverage limits and deductibles
Professional Liability Insurance Quotes
Not all insurance companies are the same. We’re backed by more than 200 years of experience, and we’ve helped more than 1 million small business owners get the coverage they need. If you’re looking for the answer to what is professional liability insurance or need help filing a claim, we’ve got your back.
Last Updated: December 16, 2022
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